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DataDiary by InnerTrends - Issue #2

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Most product people I talk to get customer churn wrong.They treat churn as an event in the customer j
 
December 13 · Issue #2 · View online
DataDiary by InnerTrends
Most product people I talk to get customer churn wrong.
They treat churn as an event in the customer journey, when in fact it is more of a process.
In this issue of the DataDiary we’ are offering you a different perspective on dealing with churn, one that gave us great results.
Enjoy and let me know if you have any questions or thoughts on it.

From a company’s perspective, churn acts like the handbrake of a car. The higher it is, the harder you have to step on the gas pedal so that you move forward.
Our natural impulse as marketers or product managers is to press harder on the throttle pedal and to increase the customer acquisitions in order to grow our business.
But churn is not about you, the marketer. It’s about them, the customers.
From the clients’ perspective, when they don’t have any more reasons to stay engaged with the product, they lose interest and forget about you. So, they churn.
The rule is simple: when the client engagement goes up, the churn rate goes down.
Most product people I talk to get customer churn wrong
Why?
Most companies I’ve worked with put all their energy into finding the one churn triggering action which they blame for all their growth problems.
It doesn’t really work like that.
Let me give you an example.
Only yesterday I decided to cancel my Product Hunt Ship subscription and I received an email asking me why I decided to leave.
Most churn recovery campaigns are designed to ask people to come back.
I answered that I only received one lead from them in the last week and it made no sense for me to continue paying.
That was the trigger. It was now too late for them to recover me. My chances of churning started increasing considerably after I ran out of ideas on how to use their product.
That was more than a month ago.
So, you see? Churn is probably very much like divorce. There is an event that triggers it, but that event is not the reason why it happens.
Bribing your users after having lost interest in your product is just like trying to fix your marriage by inviting your spouse to a romantic dinner after they filed for divorce.
And this is what most SaaS companies try to do: re-engage churned users instead of preventing churn from happening in the first place.
Fixing the event won’t stop the client from churning. At best, it might delay things a little.
The good news is that you can now predict and prevent churn.
Predicting and preventing churn
Churn happens when customer engagement goes down. That’s why, one of the easiest and most reliable ways of predicting and preventing churn is to monitor the customer engagement level changes.
To do that, we first need to quantify the engagement level in an objective manner.
You can do that by creating a list of engagement actions.
Let’s say you are Mailchimp. You would most probably define the following engagement actions:
  • sending newsletters
  • monitoring results and
  • adding subscribers
Each time a user does an engagement action, they receive engagement points. Their engagement score is the result of their engagement frequency and engagement points.
The next step is to calculate the engagement score each day and monitor each time it goes up and down.
Our stats show that, more than 80% of all those who churn register a considerable drop in engagement level a few weeks before the churn moment.
The most common scenarios of preventing churn, that we’ve noticed with our customers here at InnerTrends, are:
  • Companies sync all the users that go from high engagement to medium or low engagement with Salesforce or any other CRMs. Customer Success people can then get in touch with them right away.
  • They sync all the users that go from medium to low or very low engagement to Customer.io or any other marketing automation service and trigger campaigns designed to re-engage customers.
The best way to fix churn is to target customers while they are still active are still using your product.
Targeting them after they left takes up much more resources and can get you only that far.
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